In a significant policy shift, the government has proposed a record Rs1.22 trillion for the federal Public Sector Development Programme (PSDP) for the next budget, with a substantial 59% allocation for infrastructure projects. This proposal marks a 64% increase from this year’s downward revised PSDP and a 30% rise from the original budget of the current fiscal year.
The Annual Plan Coordination Committee (APCC) has prioritized major energy sector projects, dedicating 31% of the budget, or Rs378 billion, to these schemes—an impressive 212% increase over the previous year’s allocation. This reflects the government’s strategy to align the development budget with constitutional and National Finance Commission requirements.
Despite this record allocation, the proposed budget is still less than half of the estimated Rs2.5 trillion needed, according to the planning ministry and executing agencies. Prime Minister Shehbaz Sharif intervened to raise the proposed allocation from Rs1 trillion to Rs1.22 trillion after discussions with the finance ministry. The National Economic Council (NEC), chaired by PM Sharif, will review the APCC’s recommendation for final approval next week.
While infrastructure projects receive a significant boost, the social sector faces substantial cuts. The budget for social sector development is slashed by 59% to Rs83 billion, with the health and education sectors facing reductions of 53% and 61%, respectively.
Key highlights include:
Energy Sector: Rs378 billion allocation, up by 212%.
Transport Sector: Rs173 billion allocation, down by 44%.
Water Sector: Rs284 billion allocation, up by 92%.
The planning ministry has opposed the finance ministry’s decision to cut the development budget to meet International Monetary Fund (IMF) targets. The APCC recommended that the Ministry of Finance devise a flexible budget release strategy and refrain from reallocating development funds for non-development expenditures.
As the government navigates serious fiscal constraints, the total financing requirements for completing approved schemes are estimated at Rs9.8 trillion. The size of the PSDP as a percentage of GDP has shrunk from 1.7% in 2013 to 0.9% in 2023-24, further impacted by inflation and rupee depreciation.
The budget is expected to be announced on June 10th after the Prime Minister’s return from Beijing.
Story by Shahbaz Rana
